Business this week

On the up

America recorded yet another record trade deficit in goods and services of $28 billion in January, 13.8% higher than the previous month. American consumer prices jumped by 0.5% in February, making the Federal Reserve's nudging up of interest rates by a quarter-point to 6% seem inevitable. The Fed hinted that further rises could be expected to slow surging demand.

Japan's reluctance to open its economy to foreigners diminished a bit in 1999, according to figures from Japan's central bank. Foreign direct investment in Japan was, at ¥1.4 trillion ($12.3 billion), almost three-and-a-half times higher than in 1998.

Checking accounts

Britain's high-street banks suffered a stinging rebuke in a report commissioned by the Treasury. The banks are accused of making excess profits of as much as £5 billion ($8 billion) a year through a monopoly on the payments system and by chiselling personal and small-business customers. The government referred small-business banking to the Competition Commission and promised laws to open up the payments system.

UBS, Switzerland's biggest bank, is preparing to list its shares on the New York Stock Exchange in the next few months, prompting speculation that it wants an acquisition currency to expand its investment- and private-banking operations in America.

Chase Manhattan, America's third biggest bank, is negotiating to buy Robert Fleming, a British investment bank and asset manager. Fleming is one of the few remaining independent British investment banks, as Schroders was bought by America's Citigroup in January.

After many failed attempts European stock exchanges at last pulled off a deal as the bourses of France, Belgium and the Netherlands said they would merge to form Euronext to facilitate cross-border dealing in the wake of the introduction of the euro. Luxembourg looked likely to join and London's derivatives exchange, LIFFE, also held preliminary talks with Euronext.

Adding to the brew

Scottish & Newcastle, Britain's largest brewer, paid FFr18 billion ($2.6 billion) for brewing interests belonging to Danone, a French food group, in the latest manoeuvre in European brewing consolidation. The acquisition of Kronenbourg, France's largest brewer, and of its Belgian and Italian operations will make S&N Europe's second-largest brewer. Danone will concentrate on healthier products such as yoghurt and bottled water.

Agrochemicals is another fast consolidating business. BASF, a German chemicals giant, agreed to acquire Cyanamid, a pesticide and herbicide maker, from American Home Products for $3.8 billion. AHP can now concentrate on drugs. BASF will gain access to American markets for its enhanced range of products.

France Telecom agreed to buy 28.5% of MobilCom, a German mobile and fixed-line telecoms company, for euro3.7 billion ($3.6 billion), with a view to bidding for one of Germany's third-generation mobile licences and as a possible precursor to a full takeover. Germany's telecoms market is Europe's biggest and France Telecom has been looking for acquisitions there since its alliance with Deutsche Telekom collapsed last year.

Hutchison Whampoa, a Hong Kong conglomerate, sold a third of its 5% stake in Britain's Vodafone AirTouch, a mobile-phone operator, for £3.2 billion ($5 billion), in the largest-ever private share placement.

EM.TV, a German television company best known for its recent purchase of the Muppets, took a 50% stake in Formula One motor-racing for $1.65 billion. EM.TV said it wanted to purchase a further 25% from Bernie Ecclestone, owner of the rest of the holding company.

Bubbling under

Tiscali, an Italian Internet service provider (ISP), said it would follow up last year's initial public offering with the sale of a further tranche of shares worth up to euro500m ($480m) in the next two months. The announcement came as several high-profile European Internet stocks foundered. Recent debutantes World Online, a Dutch ISP, Lastminute.com, a British travel company, and Lycos Europe, a portal, have disappointed punters by falling below their offer prices.

Pirelli, an Italian tyre maker and cable company, announced the investment of euro1 billion ($961m) over a three-year period to develop Internet strategies to boost manufacturing and marketing. It hopes to open five fully robotised e-factories. The project will be called e-Pirelli.

DaimlerChrysler is to take a 33.4% stake, in effect a controlling interest, in Japan's debt-laden Mitsubishi Motors for around $1.3 billion. The combined group would be the world's third-largest car firm.

Striking engineers at Boeing ended a 40-day stoppage after a majority of the 15,000 workers voted to accept a compromise deal on pay and conditions. A shortfall of “respect” for workers was made up for by the establishment of a joint “leadership council” to improve communications.

Lockheed Martin, an American aerospace giant, agreed to provide a bond worth $2 billion to clinch a $6.4 billion deal to sell 80 F-16 jet fighters to the United Arab Emirates. The bond not only covers failed delivery but also, for the first time, guarantees the effectiveness of technology provided in the aircraft.